Market Size is measured by the total volume and or value of all sales in the market. Sales volume is measured in terms of the number of units of goods purchased, whilst sales value measures the total amount spent by customers on the volume of goods sold.

Estimating Market size is an essential first step to calculating the Market Share of a business, and of its competitors. By comparing changes in market size over a selected period, trends in the market can be identified. Consider the graph below providing figures for the size of the Smart TV market in the UK, expressed in terms of Units Sold.

(Source : Ofcom)

The graph shows this to be a rapidly growing market with a 60% growth year on year in the share of smart TV sales in the personal television market, and a current market share of 45%

In the short term growth markets tend to favour the supplier, because there is usually a time lag before the supply side catches up with increases in demand. This in turn tends to reduce the level of competition in the market as buyers focus more on obtaining the product/service rather than shopping around, and suppliers focus less on each other and more on meeting customers' requirements. In the long term a growth market will attract new businesses, and thus increase competition.

In a static or declining market, competition is fiercer, and companies can grow only at the expense of others. The result may be price wars, low profits and low (or no) business growth.

Using sales value figures by themselves, to identify market trends, can however be a misleading measure of growth or decline, and it is more useful to compare changes in both sales value and volume over time.

The following, extracts from the Executive Summary of a Euromonitor Report on 'Books and Publishing in the United Kingdom', provide an example of how Market Size and Trends are researched.

The UK book market is a healthy and dynamic one, and saw volume and value gains of 12.1% and 16.8% respectively over the review period, reaching a value of almost £2.5 billion in 2002.

The consumer market is the main driver of growth, and as such is highly competitive, with publishers and retailers promoting both bestsellers and new titles by lesser-known authors which have captured the public imagination. The consumer market accounted for 80.4% of sales in volume terms in 2002, compared with a 19.6% share for the institutional market.

The institutional market saw slower gains over the review period, and in the case of sales to libraries saw decreases some years. Institutional sales by value increased by 4.9% in 2002, and educational sales accounted for 63.4% of this market in that year.

Paperbacks are the dominant format in the book market and saw an 18.4% growth in volume terms over the review period. In contrast, the hardback share of the total market fell to 22.6%. In particular, this format lost ground in the educational market, where schools and libraries found paperbacks to be the most cost-effective way of increasing book volume.

Fiction was the fastest growing category, with a 13.8% rise in volume sales over the period, and an even bigger 24.1% rise in value. Quality fiction, thrillers and science fiction and children's novels are the main market drivers.

Non-fiction growth is also dynamic, with an increased interest in history, biographies and TV-inspired titles fuelling a 13.2% rise in value terms between 1998 and 2002......